BERLIN, Oct 14 (Reuters) - Chancellor Angela Merkel islikely to pick a new coalition partner this week before movingon to detailed negotiations that could produce a new Germangovernment within about two months.

While the rest of the Europe waiting for clarity in itspivotal economy, Merkel has moved slowly since the Sept. 22election towards making a deal with her two potential partners.She meets the Social Democrats on Monday (1400 GMT) and theGreens on Tuesday.

Merkel's Christian Democratic Union (CDU) and its Bavariansister party, the Christian Social Union (CSU), emerged as thedominant force from the election but, with 311 of the 631 seatsin the Bundestag (lower house), they lack a majority.

She had a first round of preliminary talks last week withthe SPD, the largest opposition party with 193 seats, and theGreens, the smallest with 63 seats. No decisions were reachedand neither party showed much desire to join her after her lastpartners, the Free Democrats, failed to win enough votes toremain in parliament.

The battered SPD is seen as Merkel's most likely ally, in arevival of the right-left 'grand coalition' that ruled from2005-09. But Germany's oldest party is split on whether to joinMerkel again after seeing its support crumble as her juniorpartner before.

"Monday's talks will be of decisive importance to answer thequestion of whether there is a stable foundation for fullcoalition negotiations," said SPD deputy leader Andrea Nahles.

The possibility that talks could take months worriesGermany's European partners, who fear the negotiations coulddelay decisions on measures to fight the euro zone crisis - suchas a plan for banking union.

Merkel has kept the option of a coalition with the Greensalive, despite resistance from the CSU. Tensions are highbetween the CSU and the Greens, a left-leaning party with rootsin the 1970s peace and anti-nuclear movements.

Although the CDU/CSU-Greens coalition is considered lesslikely, Merkel, a former environment minister, has nurtured theidea for years and promoted conservative lawmakers open to anewfangled alliance with the old political enemy.

She may need the Greens if the SPD baulks. SPD leaders havepromised the party's 472,000 grassroots members, many opposed toanother coalition with Merkel, the chance to vote on anygovernment agreement - an unprecedented and risky plan thatcould backfire.

The SPD wants a national minimum wage in Germany, wherethere is currently none, and higher income taxes on the rich,demands that the CDU/CSU reject. The SPD said on Sunday thatthere would be no deal without a minimum wage.

The CDU/CSU would get more ministries and more of its policyaims into a coalition with the smaller Greens party, whichshared power with the SPD from 1998 to 2005, than with the SPD.

By keeping the option of a coalition with the Greens open,Merkel hopes to have strengthened her hand in talks with theSPD.

"I didn't have the feeling that Merkel was only talking tous for strategic reasons," Greens parliamentary leader KatrinGoering-Eckardt told Bild am Sonntag newspaper. "We'll talk atlength with her again on Tuesday."